The Benefits of Flexible Spending Accounts
A flexible spending account, or FSA, is a voluntary opportunity offered by employers that allows you, the employee, to put money aside from your paycheck, on a pre-tax basis, to be spent on your health and/or dependent care expenses.
There are two types of FSAs. Depending on what your employer offers, you may establish one or both. Please be aware of the following information about how these two accounts vary.
A health FSA allows reimbursement of qualifying out-of-pocket medical expenses. You may receive a debit card that you can use to pay for qualified services and items. The full amount of your year’s deductions will be available for medical expenses as soon as the plan begins.
Your employer may offer a general purpose FSA, which can be used for any eligible health expense, or a limited purpose FSA, which can be used for specified expenses, including medical (covered and non-covered), dental, vision, prescription, or any combination of these options. Check with your employer to determine which services and/or items are reimbursable.
Dependent Care FSA
A dependent care FSA allows reimbursement of your costs for dependent care services, such as daycare and babysitters, that enable you to work. To qualify, you and your spouse (if applicable) must be employed, or your spouse must be a student. You will not receive a debit card to use toward these expenses. You will need to pay for them out of pocket, then file a claim to recoup payment. Unlike the health FSA, you will need to have the funds saved up in your account before you can use them.